The Wednesday Roundup: May 29, 2024

The biggest movers over the last week on price and volume (Mid Cap S&P 400 and Small Cap S&P 600)

Price and volume moves last week for every stock and sector (Mid Cap S&P 400 and Small Cap S&P 600)

Last week vs. history (Mid Cap S&P 400 and Small Cap S&P 600)

AI Oracle Commentary (Alpha testing)

As we navigate the turbulent waters of today's financial landscape, investors find n the past few weeks, the stock market has presented a complex tableau, filled with equal parts optimism and caution. Benchmark indices, such as the S&P 500 and Nasdaq, are riding on the coattails of sector behemoths like Nvidia, whose stock has surged in recent sessions thanks to investor enthusiasm for AI and Elon Musk's endorsements. However, this exuberance comes amid rising inflationary pressures and geopolitical uncertainties that have pushed Treasury yields higher. The Fed remains a crucial variable, with recent indications suggesting a willingness to hike rates should inflation persist. Adding further complications is the $933 million stock sale completion by GameStop, signaling that meme stocks are not yet a forgotten relic, and Virgin Galactic's rally ahead of a milestone mission, which instills cautious optimism in space exploration ventures.

Contrasting today's market climate with the past 50 years uncovers startling resonances and stark divergences. During the tech bubble of the late 1990s, we saw a similar meteoric rise in tech stocks, driven by relentless speculation and new technological frontiers. However, unlike the freewheeling '90s, contemporary markets are increasingly influenced by algorithmic trading and an unprecedented level of retail investor activism, thanks in part to commission-free trading platforms like Robinhood. The 1970s bore the brunt of stagflation, much like today’s concerns over inflation. Yet, regulatory frameworks and monetary tools have significantly evolved, prompting different responses from central banks worldwide. These historical echoes provide investors with invaluable context but also highlight how today’s technological and regulatory environment marks a significant departure.

Historically, the S&P 500 has averaged an annual return of around 10% over the past five decades. Despite pronounced volatility periods, such as the 2000 dot-com crash and the 2008 financial crisis, the long-term trajectory has been upward. The market tends to correct itself post any correction or crash, driven by fundamental economic growth and technological advancements. Quantitative easing post-2008 provided a liquidity injection that propelled markets upwards, a playbook that is limited today due to the high baseline levels of national debt and persistent inflationary concerns.

Given these factors, a cautious yet bullish projection is prudent. If we align our expectations with historical data, particularly during post-correction phases, the S&P 500 could reasonably achieve a 6-8% appreciation in the coming year. This is contingent on several factors, including a tempered yet positive response to Fed policies, continued technological growth particularly in AI sectors, and geopolitical stability. Investors should brace for pockets of volatility, yet remain optimistic about the market's long-term potential while preparing for adjustments as dictated by evolving economic indicators.

In sum, while we cannot predict the future with absolute certainty, learning from history allows us to make informed decisions. Balancing this knowledge with real-time market intelligence provides a nexus from which sound investment strategies can be devised, navigating the paradoxical currents of optimism and caution that define today’s market.

AI stock picks for the week (Mid Cap S&P 400 and Small Cap S&P 600)

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1. YELP
2. PARR
3. X
4. BLMN (Covered on Thursday)
5. EYE

(Based on a three month forward looking window)